Housing

The notion that negative gearing leads to an increased supply of rental dwellings is flawed: 92% of
investment is used to purchase existing dwellings, displacing previous owner-occupiers or tenants to
buy or rent elsewhere, respectively, resulting in little to no net increase in the rental stock. Negative
gearing is a poor investment strategy over the long term for investors pursuing capital gain rather
than rental income as housing prices have increased by an average of 2.4% annually from 1880 to
2011 in real terms (before 1996, housing had delivered a real return of only 0.7% annually). Negative
gearing for purposes of realizing capital gain, however, becomes a viable strategy during the boom
phase of a housing cycle as capital values are substantially appreciating. Contrary to claims that
quarantining negative gearing during 1985-87 caused a surge in rental prices, rents increased in only
some capital cities while stagnating or falling in others.

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It is recommended that, at a minimum, negative gearing be quarantined to the purchase of newly-
constructed dwellings, or preferably, be abolished. The Commonwealth Rent Assistance (CRA) scheme
is better targeted towards those who require help in the course of renting rather than subsidising
residential property market investors. Although the CRA could increase rents, it appears to be the
most straight-forward mechanism available to policymakers to aid tenants.

Commonwealth Government engagement in housing was very limited until the war of 1939-45 when the conditions were ripe for its leadership. Reviewing the nation’s social security system, Parliament concluded that housing was important in achieving a fairer society.

The Commonwealth Housing Commission (CHC) in the letter of transmittal accompanying its final report said:

"We consider that a dwelling of good standard and equipment is not only the need but the right of every citizen – whether the dwelling is to be rented or purchased, no tenant or purchaser should be exploited for excessive profit (Emphasis in original) CHC 25 August 1944)"

The CHC statement summarised the aspirations that had energised housing reformers as they responded to the privations of the previous half century. The Commonwealth’s development of a public housing program was seen as a way of giving effect to the CHC’s assertion.

This paper charts the departure from that lofty ambition since 1945 revealed as a series of episodes around the periodic Commonwealth State Housing Agreements (CSHAs) from 1945 to 2000.

Slum clearance and rehousing the displaced population was another important subject during the late Depression years. The identification of flats, terraces, and tenements, particularly in the inner city, as slums irrespective of how sound they were as housing stock was as much a moral judgment as a functional one. The claim that overcrowding in the slums would lead inevitably to alcoholism, crime and indecency, suggested that “morality is a question of square feet” (Spearritt 1974:65).

The Commonwealth proposed to create a public housing program under which households would be able to rent housing from a State housing authority as a matter of choice but low income households were expected to be a significant proportion of tenants. The original CSHA provided for the sale of houses although that the proportion would initially be very low.

Tell me about it …

A new Everybody’s Home report reveals that Australians on the lowest incomes are being priced out of renting in virtually every corner of the country, despite a rise in Centrelink payments and rent assistance.

The ‘Priced Out’ 2024 report shows people who primarily rely on Centrelink payments and the full-time minimum wage would be in severe rental stress across all capital cities and most regional areas.

The report applies Friday’s indexation increase to Centrelink payments and 10 percent rise to Commonwealth Rent Assistance (CRA) with indexation on top, with the findings underscoring the need for more social housing and for payments to reflect the cost of housing.  

Key findings include:

• Single JobSeeker recipients are facing acute rental stress, and would have to spend all their income or more on unit rents in most capital cities and 10 regional areas
• Those relying on the Age Pension, Disability Support Pension or working full-time on the minimum wage would likely be in severe rental stress in almost every part of the country
• Based on capital city rents, people on the Age Pension and Disability Support Pension would be left with $8 a day after paying rent, while a person on the minimum wage would be left with a little over $25 a day. A person on JobSeeker would be left with $0 and have to find $122 on top of their income.
• The most unaffordable areas outside of the capital cities include the Gold Coast, Northern WA, Sunshine Coast, and Wollongong, where people primarily living on Centrelink payments, or the minimum wage would have to spend at least half their income on rent.
   

Using super for housing would make homes more expensive, hinder the home ownership aspirations of young Australians, reduce retirement incomes, and lead to a significant long-term cost to the Budget, a Corinna Economic Advisory report authored by Saul Eslake has found.  

In an independent report, commissioned by the Super Members Council, Mr Eslake charts how a long list of demand-side Australian housing policies over several decades have simply made homes more expensive.  

He warns super for a house would be the worst of all.  

“We have 60 years of history, which unambiguously tells us, anything that allows Australians to pay more for housing than they otherwise could leads to more expensive housing and not more homeowners,” he said.

“Of all the demand-fuelling housing policies, the Coalition’s super for housing policy would be the biggest – it can only lead to higher prices.”  

“If super for house was introduced, it would be one of the worst public policy decisions in the last six decades.”

Mr Eslake said the decline in home ownership rates could undermine a key assumption in Australia’s retirement system – that most retirees will own their own home – and noted the need to expand housing supply.  

However, the Coalition’s ‘Super Home Buyer Scheme’ under which people would be allowed to withdraw up to 40% of their superannuation savings up to a maximum of $50,000, would likely hinder home ownership aspirations for younger Australians.

Full report here.

Today New York congressmember Alexandria Ocasio-Cortez and Minnesota senator Tina Smith have introduced new national legislation that, if passed and funded, would go a long way toward making real the social housing revolution.

The Homes Act of 2024 would create a Housing Development Authority (HDA) for the entire country. Housed under the federal Housing and Urban Development (HUD) agency but operating autonomously, the HDA’s sole mission would be to build, buy, renovate, and operate social housing, which it defines as housing with public, nonprofit, or resident ownership; permanent protections and affordability; community control; and deep sustainability and accessibility. It would be governed by a board that includes not only expert appointees in housing and the environment but also its residents and members of the unions that build and support it.

The HDA would be a flexible vehicle, modeled after a 2020 Urban Democracy Lab report entitled “The SHDA — A Proposal.” It could build social housing itself; it could buy anti-social housing and convert it into social housing, then operate it itself or pass it on to tenant, labor, or community groups; it could finance social housing projects operated by state and municipal housing agencies or Public Housing Authorities; or it could finance social housing projects initiated by tenant, labor, and community organizations or by Community Land Trusts.

Using a nationwide online survey (N = 534), we investigate how individual-level characteristics and past actions are related to support of affordable housing at the neighborhood level. Several demographic characteristics, past actions, federal government trust, personal exposure, racism (symbolic racism scale), and affect (emotional connotation) are found to be significant predictors of support. We provide evidence for racism and affect being mediating factors acting in series to shape support of affordable housing. In addition to racism, individuals’ affect can potentially help explain the shift from support of hypothetical scenarios to opposition of real affordable housing development proposals and warrants continued study.

In May, Victoria’s Housing Justice Project released a report that supported what low-income folks have been telling us directly: when you’re low-income, you cannot afford to rent most new social housing. 

Single mother of two Toni Love spoke at the project’s May 9 news conference at the legislature, pointing out that housing rules require her to rent a three-bedroom unit and make $85,000 a year to qualify for that unit.

When most people hear the words “social housing,” they imagine housing for low-income people.

But now the province — and many municipalities — don’t mandate affordability in social housing. 

B.C.’s current definition of social housing is “a housing development that government subsidizes and that either government or a non-profit housing partner owns and/or operates.”

In Vancouver, before 2015, social housing was defined as “residential units bought by the government or a non-profit using government funding in order to house seniors, disabled people and low-income families or individuals.”

Now, it’s defined as housing owned by a government or non-profit that has 30 per cent of the units with rent below BC Housing’s housing income limits, or HILs, meaning your income should be between about $40,000 and $58,000 if you rent a one-bedroom or bachelor apartment, and more for bigger units.

The other 70 per cent of social housing units are generally rented at what’s called “low end of market” — about 10 per cent below market rents. Average market for a two-bedroom apartment in purpose-built rental housing in Vancouver in 2023, according to the Canada Mortgage and Housing Corp., was $2,181 a month.

Low end of market is around $2,000 a month for a one-bedroom apartment, which is more than the total monthly income of a person on social assistance, disability or basic pension, about 74 per cent of the total income of a person earning minimum wage and 57 per cent of the income of a single person earning the median Vancouver income.

As a result, many social housing buildings in Vancouver actually exclude low-income people.

It starts with asking yourself: Do you want families downtown and in urban places? A number of cities say they do, yet they’re not willing to do what’s necessary to make it happen, such as regulate. That’s particularly a problem in the United States, where regulation is a dirty word. It’s that ideology around regulation that can often keep cities from progressing.

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Point two is, even if you have the homes, you need the services and amenities that support family living. Those start with daycare and schools.

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Point three is, you design the public realm for kids and families, because that means it will work for everyone. You have to think about all age groups: the parents with their strollers, young kids and their need for playgrounds, and then teenagers and their distinctive needs, which are different than those of younger kids.

In the United States, the federal government’s favored program for producing low-income rental housing has shifted from public housing to the LIHTC program. LIHTC provides tax breaks to for-profit investors who invest in lower-income housing. This means LIHTC essentially wastes our public dollars on enriching private Wall Street investors. The investors are earning more in tax breaks from the government than they actually pay into affordable housing. It would be more cost-effective for the government to directly fund the production of affordable housing instead of allowing this profit-skimming to occur.

[…] 

Nationally, 80 percent of LIHTC developers are for-profit entities. Moreover, many LIHTC landlords are increasingly profit-seeking corporations rather than mission-driven nonprofits. Corporate landlords also benefit from rent increases, evictions, neglect of maintenance, and deplorable conditions for tenants. Profit-seeking landlords are more likely to convert buildings to market rate once LIHTC’s temporary affordability restrictions expire.

[…]

State and federal governments must reform LIHTC to require that any housing it produces is permanently and deeply affordable, with strong tenant protections. Moreover, rather than tax breaks for for-profit investors, our communities need massive direct public funding for the creation of affordable housing.

All these things have increased housing demand, as have the grab bag of government subsidies for homebuyers: first home owner grants, stamp duty concessions, mortgage deposit guarantee schemes and shared equity schemes.

Saul Eslake sardonically calls them “builders’ and land developers’ profit margin expansion grants”, and notes that once again John Howard’s fingerprints are on them.

“Almost 60 years of history – since Menzies introduced the first home owners’ grant scheme at the instigation of the Young Liberals’ then president, John Howard – shows that anything that allows Australians to pay more for housing than they otherwise would have has resulted in more expensive housing, not in more people owning houses.

“Suppose a first homebuyer can afford to spend $500,000. And then the state government comes along and says, ‘Well, you won’t have to pay $50,000 on stamp duty’, then the homebuyer thinks, ‘Well, okay, I can now afford to spend $550,000.’ Probably buying the same house, because there’ll be someone else with the same stamp duty exemption competing for it.”